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Soultrader

[Understanding the Premium] by Traders Laboratory

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The premium is a useful tool to confirm your entry or your current position. A buy progam kicking in when you are long is usually a good confirmation of the trend. I use premium at pivot points as a further confirmation to see if price will hold or fold.

 

CLICK HERE TO VIEW VIDEO

 

 

Charts created by Tradestation

Presented by Traders Laboratory

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It is the first time for me to learn about premium, thanks Soultrader for excellent explanation. In the video you used ES premium vs YM, what's the reason? are there any cases you will watch the YM premium for trading signals?

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Thank you--very helpful. Question about data on indexarb.com--

When trading the YMs, do you use the S&P numbers and do you your "sell active", "sell threshold", and same one for buy side?

 

I appreciate your assistance, and the site.

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It is the first time for me to learn about premium, thanks Soultrader for excellent explanation. In the video you used ES premium vs YM, what's the reason? are there any cases you will watch the YM premium for trading signals?

 

Hi, I am not familiar with a site that provides YM premium levels. If you are aware of this, please share it with us.

 

The YM mimics the ES in terms of movement which is S&P premium can be used for the YM.

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Thank you--very helpful. Question about data on indexarb.com--

When trading the YMs, do you use the S&P numbers and do you your "sell active", "sell threshold", and same one for buy side?

 

I appreciate your assistance, and the site.

 

If you scroll down on indexarb.com you will see a section labeled "Our Trading Guidelines". Those are the numbers I use.

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Look at vidoe very carefully at opening. For the price run up 1st, but look at Premium, it formed a down channel. Divergence of this kind is very powerful indication that the opening up run is usually a fake out. Pattern of this kind is very useful on gap day. gives you better indication if the gap will get filled or not.

 

weiwei

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Look at vidoe very carefully at opening. For the price run up 1st, but look at Premium, it formed a down channel. Divergence of this kind is very powerful indication that the opening up run is usually a fake out. Pattern of this kind is very useful on gap day. gives you better indication if the gap will get filled or not.

 

weiwei

 

Very interesting weiwei. I have been wanting to learn more trading methods using the Premium. Can you shed us some light on how you use Premium in your trading?

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Soul,

1. Opening price and Premium divergence is one way I use the most.

2. Pattern on trending day, not any trending day, but the trending day that price just move upward without any big up bar or down bar. But price keep on advancing and close near the high. This is what I call a systematic buying. It is usually very calm on Premium, act as it is in a slow day. and Premium will usually stay in the middle without hitting the up or down trigger line.

 

3. depends on market condition, when buy or sell program triggered, most of time it dose not confirm the direction of the move. Or we can said it is fake out. But if they trigger in a very close time period, said 3 times in 5 minutes, then usually it is show that price will have strength. Otherwise, it is usually a indication of top or bottom on current swing.

 

Number 1 is the one that I use the most for fading opening gap.

 

Number 2, do not happen a lot, but if one can spot it, then one can ride this trend, and trend of this kind usually last for a while. Because big boys are not playing games to get in, they just want to get in, thus I call it systematic buying or selling.

 

Number 3 is harder for people who is new to this indicator, I usually ignore it if it happen randomly, unless the frequency gets intense. Got burned many times thinking that when buy/sell program triggered, price suppose to continue in that direction, but end up get in at low or high of the swing. This just to tell you before you use any indicator, know it inside out or pay for the tuition to learn it, like me. :)

 

weiwei

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weiwei, for your number one there will always be an opening price and premium divergence when there is a gap because the premium is just the difference between the future contract and the underlying index.

 

Your number two sounds good because it shows that the future contract and underlying index are moving together so it's not just a temporary spike in the futures that's not followed through by the buying and selling of stocks in the underlying.

 

For number three it makes sense that a program buy would happen at a top and a program sell would happen at a bottom because it shows there was an interest in buying/selling the futures but not the underlying stocks. The problem is that there are often program buys constantly triggering during up trends and program sells constantly triggering during down trends.

 

Personally I don't use the premium at all. It's great for those who have the capital and technology to run arbitrage programs to buy and sell SPDRs but if you only trade futures there are better indicators to use.

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good point Notouch, as those are from my own observations, but do not have clue on why it is that way. this should help others to understand more about this indicator.

 

weiwei

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